Energy market simulations Under Climate Stabilization transitions
Donald A. Hanson, Argonne National Lab, 630-252-5061,
John J. Marano, Energy Consultant,
Tito Homem-de-Mello, NorthwesternUniversity,
Anant Vyas, Argonne National Lab,
En Zhu, Argonne National Lab,
Overview
There are key uncertainties in the details of what the energy future will look like, but we have a pretty good idea of what kind of general picture may unfold and what we need to do to get there. It will need to be a low carbon emissions world, and use resources more efficiently.
Rising world demand for personal transportation will require much greater light-duty vehicle fuel economy, and supplementary biomass-based fuels. Rising demand for freight transport and passenger jet travel (also a middle distillate like diesel fuel) will be hard to slow, so the supplementary biomass fuels will need to produce bio oils for diesel as well as gasoline substitutes like ethanol.
Biochemistry and genetic engineering show great promise, but at this point we don’t know the outcomes. Currently enzymes that digest biomass are slow, expensive, and not available for many types of potential biomass feedstocks. And many of the processes are biased toward producing gasoline substitutes.
An alternative pathway leading to the same goal is to process bio oils within petroleum refineries. This pathway uses similar processes that exist in today’s refineries: thermal catalytic cracking and hydrocracking and upgrading with hydrogen. The refinery can then blend the outputs of a number of process streams to produce the desired mix of gasoline and diesel that are demanded in the market place.
Note that the prices of refinery products must in the long run cover refinery costs, but that the relative price of diesel to gasoline is expected to rise based on less elastic demand for diesel than for gasoline. Hence that higher diesel price will be necessary to balance both the diesel and gasoline markets.
So on the fuels side, we don’t know at this point whether a separate biomass to biofuels pathway will predominate or not over the processing of bio oils within petroleum refineries. Further, if we are to sustain economic growth we will need biomass feedstocks in much greater quantities. Algae is being looked at extensively as an efficient photosynthesis process to product bio oils.
On the electricity market side, there is also uncertainty in the future. The low carbon generation pathway could be nuclear, wind, PV, central station solar, geothermal, ocean energy, or advanced coal (e.g., chemical looping) with carbon capture and sequestration (CCS). Or likely we will need all these sources in combination, since the case can be made that they all face some kind of upward sloping supply curve. These low carbon technologies will also begin slowly in the market place and over time lower costs will be achieved with increased market penetration, displacing old pulverized coal power plants. As part of the transition, some existing coal plants will likely be life-extended for another twenty years and retrofitted with amine scrubbers or oxyfuel combustion with carbon capture. This will produce the first large commercial pipeline scale of CO2 for long term testing of underground injection and sequestration.
Methods
This paper builds on work done for the Stanford University Energy Modeling Forum, EMF-22 Study, on Climate Stabilization Transition Scenarios. We have run a set of integrated energy-economic models under three carbon tax paths to represent alternative levels of long term stabilization for radiative climate forcing. The models include the MARS fuels production and market model, a vehicle stock model, the Utility Planning and Compliance model which dispatches power plants, the Forest and Agriculture Sector Optimization Model (FASOM), and the AMIGA multi-industry growth model accounting for productivity, income, investments and other expenditures. The solver for the integrated model set converges on a common, consistent solution for energy prices, quantities, and income in each period. Although the focus is on the U.S., the energy market and economic activity simulations include the major world regions.
The work is extended beyond the EMF study by embedding the energy-economic model into a Monte Carlo sampling algorithm to explicitly represent key uncertainties and distributions of outcomes. We show that improving a portfolio of low-carbon energy technologies cuts off the highest cost portion of the distribution of outcomes.
Results
The rate of increase in crop and biomass yield per acre significantly affects biofuels availability. Alternative diesel fuel technologies turn out to be particularly important. This is because it is not feasible to increase diesel production by more than 10% in the medium term and 20% in the long-term by major replacements of refinery processes.
These higher diesel technologies include hydrocracking, and coal and biomass gasification with carbon capture and sequestration, and advanced future feedstocks and processes to produce bio oils such as pyrolysis.
We find both the fuel and electricity markets to be in tight supply during a transition to low-carbon production. Hence there doesn’t seem to be as much room as some people hope for electricity supplied plug-in electric vehicles.
Carbon prices are likely to be initially limited by political considerations; they will need to increase over time to a level needed to meet a CO2 concentration target. Once they reach that level, a slow growth in carbon prices is still needed to keep up with rising incomes and purchasing power worldwide.
Conclusions
In broad terms we can have a vision of the energy sector necessary to meet stringent climate related goals. We need to work on all the elements of that vision. There is still a lot of work to be done on implementation details, and detailed pathways remain uncertain.